I. Introduction Starbucks today is widely recognized as the megabrand for coffee, and there clearly are no close competitors that have its international recognition and scope. Starbucks has grown to employ over “160,000 people and generates about 13.6 billion dollars annually” (Forbes). Much of Starbuck’s success is attributed to a man with a clear vision and drive: Howard Schultz. Howard Schultz’s passion for delivering quality coffee along with a positive café experience has given him the motivational determination to demonstrate exceptional leadership traits. This paper will give a brief overview of the history of Starbucks, and will then investigate the changes that were made after Schultz stepped in. Furthermore, problems that Schultz encountered throughout his time as CEO will also be discussed, along with the key steps he took to bring Starbucks back on to a road of recovery. As a concluding remark, Schultz’s leadership style and abilities will be analyzed in terms of effectiveness.
II. A Brief History of Starbucks Looking at the Starbucks company today, it is difficult to imagine that a company that has over twenty thousand locations in sixty-one countries (Starbucks) was once a single small retailer that had only three employees. In 1971, three academics, Jerry Baldwin, Zev Siegel, and Gordon Bowker, opened a small store at Pikes Place Market based on their collective love for fine coffee-making. Baldwin, Siegel, and Bowker’s initial goals were to expose Seattle to bring a refined coffee culture that existed in the San Francisco Bay Area. The three looked to Alfred Peet, an expert coffee roaster from Berkeley, CA, who taught them the art of dark-coffee roasting. Baldwin, Seagel, and Bowker took on that knowledge to produce their own roasts and blends that were then distributed in their stores.
Ten years later, Howard Schultz, then the vice president and general manager for a Swedish kitchen and housewares, visited Starbucks to see why they were placing such large orders for a particular coffee maker. Schultz was immediately captivated by the aromas and quality of coffee that was offered by the store. He, gained as much insight as possible from Baldwin and Bowker about the entire coffee production process, and later convinced them to join their team.
It was not until Schultz took a trip to Italy, when he began to envision a new Starbucks. Schultz visited many espresso bars and was exposed to a new culture of coffee drinking that we wanted to bring to the United States. Upon his return, Schultz did all he could to convince the managers at Starbucks to get a full espresso bar and begin serving lattes and drinks at Starbucks. Due to many disagreements with the managers on the values and culture that Starbucks should have, Schultz mad a decision to leave and start his own café: Il Giornale. With this venture, Schultz had the executive freedom to create a culture that he passionately envisioned. Schultz’s business plan was widely successful, and within two years, he opened up “three cafes that generated 1.5 million dollars annually” (McGrawhill). With his success, Schultz acquired Starbucks to gain wider reach and growth.
III. New Era for Starbucks and Problems Arising Now as the new CEO of Starbucks, Schultz faced many difficulties and challenges. The biggest problem that Schultz faced was making sure that Starbucks retained its “soul” in spite of growing into a large corporation. The biggest issues that played into Starbucks maintaining its soul was hiring the right managers and executives on his team, having consistent quality products and in-store experience for all Starbucks stores, and lastly- establishing a positive company culture for both the employees and customers. At the start of his career as the CEO for Starbucks, Schultz was faced with many obstacles to overcome. The first issue he tackled was getting the right people on his team. Lack of a Strong Core Executive Team
With nine stores open, Schultz saw that Starbucks lacked professional management skills to control all the processes to grow to his plan of adding “125 stores in the next five years” [McGrawHill]. He made sure to add “A players” to his team: roasters and café owners with decades of experience, a president of a profitable beverage company, and a CFO with eighteen years of management consulting experience at Deloitte and Touche. Schultz was able to see the need to recruit strong players with a lot of experience in the coffee and management industry. Early on, Schultz addressed the lack of organization management that was crucial for Starbucks to accelerate forward. Employee Enthusiasm and Commitment
Another problem that Schultz faced was the issue of building a strong core of employees throughout the company. Schultz found that as the company grew, it lacked strong dedication from its employees. Starbucks had a high turnover rate, just like many other entry-level service jobs at McDonalds or retail stores. Schultz saw this as a huge problem for not only the money Starbucks lost through losing an employee and having to pay more to hire and train new ones, but also losing team members. Schultz wanted to create an environment for Starbucks employees in which they would want to stay in. Schultz had difficulties convincing Starbuck’s Board of Directors to invest in constant training, higher salaries, and rewards based on merit.
He even went far enough for wanting baristas to become invested in building Starbucks into a great company, and thus offered them stock options. The biggest action step he took to really show that he wanted to show that Starbucks had a heart for their employees was fighting for providing health care coverage to all its employees. Schultz’s father recently battled cancer, and he knew that it would not only add tremendous value to the lives of Starbucks’ employees, but also allow them to have an incentive to stay. Through a particular story about the impact that Starbucks was having on its employees lives, I learned that Schultz had high emotional intelligence and the ability to put himself in others’ shoes. Schultz recalled,
“I had known Jim was gay but had no idea he was sick. His disease had entered a new phase, he explained that he wouldn’t be able to work any longer. We sat together and cried, for I could not find meaningful words to console him I could not compose myself. I hugged him”. [McGrawhill]
Schultz built his career from the bottom up from nothing, and his ability to demonstrate sympathy to others clearly showed great leadership skills. Having adept emotional skills is incredibly valuable for a leader because it gains the trust and approval of many people. Maintaining Consistent Product Quality and Customer Experience
The last problem that will be discussed in this paper is how Schultz ensured product quality and positive store experience throughout all the Starbucks locations. Schultz could not emphasize enough how important it was to maintain the integrity of the coffee bean and the quality of the coffee throughout the stores. In order to do so, he made strict guidelines on preserving the heart of Starbucks’ history: getting good coffee to all customers. Starbucks had the option of chemically flavoring the beans, but Schultz made the executive decision to never add any chemicals to their core products. If customers wanted flavoring in their coffee, the source of additional flavoring could not come from the bean, but rather from a syrup mixed into the coffee. Another example is that he stressed the exact temperature that the milk for lattes needed to be heated to, the amount of time coffee can sit in a pot, and always compensating dissatisfied customers with a free drink. Schultz’s stringent standards on delivering consistent experiences also let him to scrapping a popular breakfast sandwich because it interfered with the coffee aroma in the Starbucks stores.
III. Schultz’s Leadership Style Without Schultz trailblazing leadership styles, Starbucks would not have nearly achieved the success that it has today. The passion that Schultz exudes in terms of implementing the true Italian coffee house experience on an international scale has definitely shown through in his time as CEO. Schultz’s leadership style shows a commitment to keeping soul despite the large size of the company. Schultz’s standards for quality have never been compromised, and he continually makes the effort to ensure that his entire company is on board with delivering his goals. Aside from delivering quality to customers, Schultz’s leadership style also emphasizes treating all of his employees with respect and individuality. He guarantees that when working at Starbucks, an employee will be treated with fairness and dignity. Schultz more than anything emphasizes improving quality in terms of any experiences for whoever comes in contact with the Starbucks name. IV. Opinion on Leadership Style and Takeaway
Schultz’s strong vision and keen awareness for what the Starbucks brand was very telling when he came back to Starbucks after stepping down. Schultz saw many problems, such as too many stores and below-par customer service. Schultz made a very bold move to close down Starbucks stores for three hours for mandatory training that cost the company millions of dollars. Schultz also closed down many locations. Schultz is very serious when it comes to giving a positive customer experience, and drives his motivation and actions off of that. I believe that Schultz’s ability to isolate and deliver the needs of Starbucks’ customers is his strong point. He has always been convincing Starbucks partners and board of directors to also see his standards for quality and having Starbucks retain its “soul”. His leadership style has definitely proved to be effective in building Starbucks into the behemoth of a company that it is today.
Personally, I hope to be as passionate about delivering something to consumers when I take on a leadership position. To be cognizant of what exactly needs to get done to deliver a quality experience without losing focus is an important trait that can be learned through Howard Schultz’s leadership style.